Do Consumers Care About How Prices are Set?

Courty, Pascal; Pagliero, Mario

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Do Consumers Care About How Prices are Set?

CEPR Discussion Paper No. DP6533

27 Pages Posted: 5 Jun 2008

See all articles by Pascal Courty

Pascal Courty

University of Victoria; European University Institute - Economics Department (ECO); Centre for Economic Policy Research (CEPR)

Mario Pagliero

University of Turin - Department of Economics; University of Turin - Collegio Carlo Alberto

Date Written: October 2007

Abstract

Using a survey approach, we ask consumers to reveal their preferences over pricing schemes that may differ in terms of the average price of consumption, the amount of price variation, and the probability of being rationed. We find that consumers dislike pricing schemes that vary prices more but that they are willing to trade off price variation and rationing. Surprisingly, they are not willing to trade off an increase in price variation for a decrease in expected prices. We discuss the implications of these findings for firm pricing policies.

Keywords: antagonism, Consumer demand, demand fluctuation, fairness, rationing

JEL Classification: A12, D01, D12

Suggested Citation: Suggested Citation

Courty, Pascal and Pagliero, Mario, Do Consumers Care About How Prices are Set? (October 2007). CEPR Discussion Paper No. DP6533, Available at SSRN: https://ssrn.com/abstract=1140060